Can this all be reversed once the crisis is over, or has the Rubicon been crossed?
INTERVIEW WITH H.S.H. PRINCE MICHAEL OF LIECHTENSTEIN – Part II of II
Claudio Grass (CG): Since the start of the pandemic, we’ve witnessed extreme efforts to increase top-down control and to centralize power in ways that affect almost all aspects of a citizen’s life. Do you expect that this can all be reversed once the crisis is over, or has the Rubicon been crossed?
HSH Prince Michael of Liechtenstein (PM): I still hope, but I am not very confident, that the Rubicon has not already been crossed. Power is a drug and a technocracy that receives power will be reluctant to relinquish it. The current situation has shown that, due to fear and uncertainty, measures are being accepted that limit individual freedom. Of course, it must be appreciated that governments strive to protect the population in the case of an epidemic, and this can make extraordinary measures necessary. However, one must rely on the fact that such measures are temporary and will be withdrawn as soon as the danger is over.
I see contact tracing as the biggest danger. Contact tracing can easily become mandatory, for example for everyone who wants to use public transport or to cross national borders. This is an intrusion of personal privacy which could be maintained. Certain airlines already announced that they will implement contact tracing in the future. We must not forget that in the US, the Patriot Act already allows authorities to intrude into a citizen’s privacy and in Europe, the obligation to store data of all telecommunication and internet activity for two years already exists, despite the fact that according to the European Court, it violates the European Charter of Human rights. This is a measure which could also become permanent. In a free society, a government has to be transparent and accountable to its citizens. But the individual citizen has a right to his privacy and is not accountable to authorities for his acts as long as he or she respects the law.
CG: If there was anything truly special about the economic handling of this crisis, it was the fierce return of fiscal firepower. A lot of us expected the central bankers to do “more of the same”, but the sheer scale of the government spending was unprecedented in most Western economies. Meanwhile, nobody in any position of authority seems to care about such things as “debt” and “deficits” anymore. Should investors and citizens care about these concerns or are they merely “a problem for another day”?
PM: In short-term thinking, it probably is a problem for “another day”, but it should not be considered as such. The world has become accustomed to the idea that governments can incur any debts they want without negative consequences. And a number of economists advocate for the Modern Monetary Theory that believes, that a state has an unlimited possibility to accumulate debt. It is not the first time that people, also intelligent ones, ignore the laws of mathematics and think that two times two makes a few hundred.
CG: An astounding number of “experts” and mainstream economists are confidently projecting a great recovery in 2021, and stock markets are operating as though it has already happened. And yet, unemployment numbers, productivity metrics, household savings, and virtually every other measure that relates to the “real economy” seems to paint a very different picture. What is your own outlook going forward? Are we really going back to “business as usual” in a few months?
PM: Business as usual would be nice, but unfortunately is not realistic. Too much damage has already been done. But still, it would not be too late to apply sound politics and to follow the principles of the market economy, entrepreneurship and self-responsibility in an economy with fundamentally sound finances. Some liquidity in the market can certainly work miracles in times of crisis.
But what we see now, is that even trillions of additional money do not help “mainstreet”. This has already been tried over the last years and economies have already been driven by abundant liquidity. The lockdowns have destroyed a good part of the economy’s business basis. The stock market might still go up and it might absorb some of the additional liquidity, but it is also a sign that the purchase power per Dollar or per Euro on the asset market decreases. The “Great Reset”, which I have mentioned before, in a healthy way would be to restart the economy with sound market principles.
Unfortunately, it looks more like the “Great Reset” will rather go towards a model, as proposed in the “New Normal”, which will lead societies and economies into a big mediocrity. Mankind can survive in mediocrity, as the German Democratic Republic (GDR) has demonstrated. But in sharp contrast, Western Germany proved how society can do more than merely survive, but actually thrive and flourish in a free market economy. Now the question is, do we choose the “Great Reset” that follows a model similar to the one of the GDR or rather the model of West Germany?
CG: Apart from the challenges of the pandemic itself, we’re also witnessing some important developments on the global political stage: the US election, the recently reignited tensions with Iran, the growing mistrust of much of the West against China… Given your vast experience and understanding of geopolitical dynamics, what are the core issues that you anticipate will play a key role in the coming year?
PM: For geopolitical and hegemonic reasons, a conflict between the US and China is unavoidable, regardless of who is the President of the United States. As we can see, in consequence, the conflict will lead us away from globalisation and towards a certain fragmentation. China wants to become more independent from the US Dollar system and the western-driven systems of trade and business. This tendency will continue and for Europe the question will arise of how to position itself in this conflict. The great difficulty of the western world is the loss of confidence in its own system, due to many years of comfort and luxury. This weakens the western response to the Chinese challenge. The western world should not try to contain China, but rather try to play to its strengths of freedom, self-responsibility and market economy. Unfortunately, especially Europe, is heading to multilateral standards and harmonised systems based on a lowest common denominator, but with high bureaucratic standards. This weakens western democracies compared to autocracies.
Today, we are in a geopolitical situation that mirrors the European political situation at the time before World War I. At the same time, the current economic and debt situation is very similar to the situation in the 1930s, before World War II broke out. It is thus all the more important now to find the way back to the old principles of freedom and market economy. Market economies are per se social, as the German economic miracle proved after World War II. Even if the outlook for 2021 is difficult, I trust that this crisis might lead the western world back to realism and pragmatism and to a free society and free market economy. These two elements need each other.
Claudio Grass, Hünenberg See, Switzerland
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